Archive for June, 2009

GenY Mobile Payments Crack The Holy Grail Of Convenience Versus Security

Thursday, June 25th, 2009

Most web applications, online shopping websites and payment methods force users to choose between convenience and security: Somehow, convenience seems to come at the cost of security and security makes life somewhat inconvenient (see P2FM Services Walk The Tightrope Between Convenience and Security and How Usability Can Increase Adoption of Internet Banking for a couple of my previous blog posts on the intriguing tradeoff between convenience and security). This traditional convenience versus security tradeoff has inevitably led to many people shying away from online shopping either because they’re worried about identity theft or are weary of having to jump through too many hoops to complete a simple purchase transaction. Etailers seeking greater revenues by driving up online shopping and financial institutions attempting to cut costs by migrating more and more transactions to lower-cost online channels are among the many industries that would benefit from a resolution of this tradeoff.

Welcome to BOKU, BillToMobile, payMO, Zong and MobillCash. These startups belong to a relatively new genre of mobile payment methods that seems to have cracked the holy grail of convenience versus security. To differentiate them from traditional mobile payment / m-wallet applications that have been around for years, I’ll use the term “GenY Mobile Payments”, or, simply, “GYMPS”, while referring to these next generation of mobile payment providers. Traditional mobile payment providers like Obopay, mChek, Firethorn and many others insist that their users pre-register and pre-fund their accounts from conventional sources like credit / debit cards or bank accounts. They demand a change in consumer behavior in an everyday task like online shopping and the jury’s out on how widespread their adoption will ever become.

With GenY mobile payments, things are quite different. They deliver a powerful combination of convenience and security to online shoppers and don’t expect a change in consumer behavior.

As this video of BOKU explains, shoppers don’t have to pre-register for GYMPS, so there’re no user names and passwords to remember. They don’t ask you for credit or debit card details, so shoppers are saved the trouble of entering card number, expiration date, CVV and the like (estimated to be around 70-100 keystrokes), not to mention the anxiety of leaving behind their confidential financial information on a multitude of websites. With GYMPS, to buy something over the Internet, you just enter your already-memorized mobile phone number on the merchant’s website, wait for a few seconds to receive a unique password by SMS on your mobile phone, which you then enter on the website to complete the purchase transaction. You get billed for the purchase on your mobile bill (or, if you’ve a prepaid mobile phone, the purchase cost gets automatically deducted from your balance). Although your mobile number may be widely known and can be entered into a merchant’s website by anyone, since your mobile handset is (or should be) always with you , only you can read the unique password sent by GYMPS and complete the transaction. Called two-factor authentication in security parlance, this is the “crown jewel” of security. (If you lose your handset, GYMPS are just another reason for you to call your mobile service provider immediately to de-activate your connection).

GYMPS should score over other payment methods from the merchant’s perspective since they do not force merchants to hand over consumers to third party payment websites at the crucial moment of purchase. This is in sharp contrast with most other forms of alternative payments (like PayPal, BillMeLater, eBillMe, BillDesk, iDEAL, and so on) where merchants lose sales due to “shopping cart abandonment” if consumers face problems – or suddenly develop cognitive dissonance – during their mandatory visit to the alternative payment provider’s websites to complete the transaction. Zong, one of the leading GYMPS, even claims that merchants offering the payment method enjoy 10X conversion as compared to credit / debit card payments.

With such a rarely-found combination of convenience and security, GYMPs appear to have great appeal to consumers and merchants alike. With over two billion mobile phones in the world compared to fewer than 600 million credit / debit cards, will GYMPS trigger a surge in online shopping volumes? Will they push out traditional card payments now accounting for over 70% of online payments?


The real rub with GYMPS lies with their high transaction costs. Though banks and card networks – and hence interchange fees – are out of the GYMPS loop, telecom companies who own billing to the consumer, extract a big chunk for their service. As a result, merchants have to cough up as much as 30-50% of transaction values by way of processing fees in the case of GYMPS. Merchants who have been fighting card networks for years over the relatively paltry 2-3% interchange fees are not likely to sign up with GYMPS in droves at these levels of processing costs.

Zong does make a convincing argument that, despite high transaction costs, their 10X conversion rates (arising out of significantly lower shopping cart abandonments) can result in greater net revenues for the merchant as compared to credit card based payments. But, it remains to be seen how many merchants rigorously measure shopping cart abandonments in the first place; and, even amongst those that do, it is questionable how many will attribute abandonments solely to the lack of convenience and / or security inherent in other payment methods that cost them much less than GYMPS. (Interestingly, PayPal, a leading alternative payment provider which faces a threat to its transaction volumes if GYMPS grow in popularity, recently released a survey of top ten reasons why online shoppers abandon their transactions. Not surprisingly, security is at a distant # 10).

Until transaction costs head south from their current levels of 30-50%, we can expect the main appeal of Gen Y mobile payments to be restricted to online sales of digital goods (where the marginal cost is nil) or services at high margins. So, for now, GYMPS might want to direct their go to market efforts to such niche segments of the market instead of frittering away their marketing dollars to sign up each and every category of consumer and merchant.

Why Inside Sales Guys (And Gals!) Don’t Stick Around For Long

Thursday, June 18th, 2009

Unearthly working hours are often blamed for the high attrition rates seen among inside sales guys (and, increasingly, gals!) in the IT industry.

My last two months of interviewing over 15 people for inside sales positions within my company GTM360 and its customers reinforces the common belief that inside sales professionals keep job-hopping once in 12-18 months. However, after talking to many inside sales people who have jumped ship frequently and a few who haven’t, I’m inclined to believe that there’s lot more to attrition than unearthly working hours.

Most inside sales reps are young (mid- to late-twenties) and have few family commitments. They’re eager to learn the selling process and are excited to be in a unique position where they’re able – in fact required – to required to reach out to senior customer executives so early in their career (contrast this sharply with most of their colleagues in delivery and technical functions who have to wait for eight to ten years before they become project managers and can get to interact with similar levels of a customer organization). Inside sales people don’t really mind working late hours because they know that’s the only way they can get to interact with their customers and overseas colleagues during the typical US or European business day.

A common refrain I’ve heard from many inside sales reps is that their company lacks focus and offers very little support while they’re toiling away at their tasks of generating qualified leads from a market that has little or no knowledge of their company. Having sensed the mistaken notion among some companies that qualified leads will start gushing simply by hiring a couple of inside sales reps, giving them a few mailing lists and asking them to start making cold calls, I’m not very surpised at what I’m hearing from these inside sales people. In fact, cynical though it may sound, I can’t help recalling the early days of offshoring when many companies thought that employing a few field sales people would automatically turn on the tap of orders.

On the other hand, the few companies that have mastered the go to market process have been able to provide the tools that ensured success of their business development efforts and gained the loyalty of their inside sales staff.

While a detailed description of the go to market process is beyond the scope of this blog post (interested readers can click here to know more), suffice to say that offering creation, collateral development and inbound marketing constitute its vital elements.

Offerings should not be confused with traditional technology service lines like application development, maintenance, implementation, upgrades and support. During the go to market stage, which precedes the sales and presales cycle, offerings have to be conceptualized as solutions to business pain areas that appeal to the target audienc’s C-Suite. Traditional technology service lines and associated collateral like capability documents and presentations, tend to work only when the service provider has already generated / received a qualified lead and must convert that into an opportunity. But, they will fall flat when a service provider’s inside sales organization has to generate qualified leads from the open market comprising of companies that are strangers to the service provider. To cut it at this stage, offferings and supporting collateral like offering detail notes and presentations must demonstrate clearly how they will help customers increase revenues, reduce costs, improve  margins, manage risks and address other business pain areas.

Inside sales reps resorting to traditional email and telephone campaigns will find that the odds are stacked against them as they attempt to garner the attention of increasingly guarded and fickle executives who have no choice but to spurn such conventional outbound marketing tactics practiced by a multitude of service providers who all sound quite similar to one another. To bolster inside sales effectiveness against this backdrop, service providers have to blend conventional approaches with next-generation inbound marketing techniques like search marketing, landing pages and microsites.

These challenges are not too new. The responses are not exactly rocket science. However, the extent to which IT companies are fighting the problems with the right mix of go to market inputs is certainly not uniform. And therein lies the key to containing inside sales attrition.

Companies lacking a comprehensive go to market strategy will find that their inside sales reps will have very limited effectiveness. With very few people in their companies willing or able to understand their plight, inside sales people tend to jump ship every so often with the fond hope that their next employer will show greater appreciation of the go to market process. Because inside sales people generate leads and have direct contact with many prospective customers, a company loses lot more than its training investments on these people when they leave the company.

Over the past few years, IT service providers have adopted globally-recognized process and quality frameworks like ISO and CMM after realizing that, without them, their vast pool of qualified and experienced people will not be able to deliver good quality software. The time has now come for them to embrace world-class go to market processes to boost inside sales effectiveness, keep sales funnels full and grow revenues. While many service providers will debate the ROI of investing in marketing, there are a few smart ones – among them some small, but enlightened, companies – who have made the move knowing fully well that they need to bag only one incremental deal in order to recover their entire investment in devising and implementing an all-round go to market strategy.

PS: I’ve heard a few more genuine concerns from inside sales people around office seating arrangements, rewards and recognition and career path. But, since I don’t want to make this blog post any longer or stray too far away from its basic theme of attrition, I’m deferring their coverage to a future post.

Why Buying Gold From A Vending Machine Isn’t So Low Touch After All

Tuesday, June 2nd, 2009

Just as Frankfurt Airport is a major hub for air traffic in Europe, Frankfurt Hauptbahnhof (main train station) is the center of the European railway network. With over 1,200 arrivals and departures every day, it is one of the busiest railway stations in the world.

Spread over over four levels, Frankfurt Hauptbahnhof is like a mini-city in itself, with one whole level reserved for shopping. In a place like Germany where shopping hours are strictly regulated by the government (see my blog post Commercialization Is The Key To National Prosperity for my gripe about this), Frankfurt Hauptbahnhof is one of the few places (apart from the airport and 24 hour gas stations) where shops can stay open on Sundays as well as until late on Saturdays and weekdays. As a result, during my days in Frankfurt, I’ve had many occasions to visit the grocery stores, bookstores, pharmacies and restaurants situated in FFM Hbf (short name for Frankfurt Hauptbahnhof) – but never its gold store, which opened only a few days ago. 

Yes, you heard it right.

Last week, a vending machine selling 1 gram 24 carat gold opened up right on the main shopping zone of FFM Hbf. Insert your EURO currency note or swipe your credit / debit card, and out comes gold in a nice gift box along with a certificate of authenticity. Although its owner, the German online precious metals discounter, calls it a bar, I guess, at 1 gram, it’d be more like a coin. In keeping with the volatility in the bullion market, the vending machine updates the price every ten minutes. I’m sure it’d be a novel shopping experience to buy gold from an automatic vending machine. How I wish I were around in Frankfurt now to try out this world-first!


For those of you who believe that buying gold is very high touch and can’t do it like coffee, soft drink, potato chips, chocolates and a plethora of other things that you can buy from vending machines in Germany, I suggest a visit to one of the Indian banks that aggressively advertise for gold, especially during festival seasons. During a trip to the branch of a leading private sector bank, I inquired about the price of gold that they were selling. I was shocked to receive a quote on a torn and tattered scrap of paper. Bank branches are supposed to be “high touch” channels as against telephone, Internet and ATM. However, this bank exhibited lower touch in selling gold than vendors selling vegetables in a crowded market. Compared to such bank branches, buying gold from a vending machine is not so low touch after all!